NONE
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:

Yes [X] No [_]

Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: 17,636,465 shares of the Companys Common
Stock, $.01 par value, were outstanding as of July 31, 2002.

BIOCRYST
PHARMACEUTICALS, INC.NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 1. Basis of Preparation

The
condensed balance sheet as of June 30, 2002 and the condensed statements of
operations and cash flows for the six months ended June 30, 2002 and 2001 have
been prepared by the Company in accordance with accounting principles generally
accepted in the United States and have not been audited. Such financial
statements reflect all adjustments that are, in managements opinion,
necessary to present fairly, in all material respects, the financial position at
June 30, 2002 and the results of operations and cash flows for the six months
ended June 30, 2002 and 2001. These condensed financial statements should be
read in conjunction with the financial statements for the year ended December
31, 2001 and the notes thereto included in the Companys 2001 Annual Report
on Form 10-K. Interim operating results are not necessarily indicative of
operating results for the full year. The condensed balance sheet as of December
31, 2001 has been prepared from the audited financial statements included in the
previously mentioned Annual Report.

Note 2. Net Loss Per Share

The
Company computes net income (loss) per share in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share. Basic net
income (loss) per share is based upon the weighted average number of common
shares outstanding during the period. Diluted net income (loss) per share is
based upon the weighted average number of common shares outstanding and dilutive
common stock equivalents during the period. Common stock equivalents are options
under the Companys stock option plan and common shares expected to be
issued under the Companys employee stock purchase plan and are calculated
under the treasury stock method. Common equivalent shares from unexercised stock
options are excluded from the computation when there is a loss, as their effect
is anti-dilutive.

For
the three months ended June 30, 2002, common stock equivalents of approximately
354 shares were not used to calculate net loss per share because of their
anti-dilutive effect. For the three months ended June 30, 2001, common stock
equivalents of approximately 61,917 shares were included in the weighted average
shares outstanding used to calculate diluted income per share. For the six
months ended June 30, 2002 and 2001, common stock equivalents of approximately
38,112 and 98,362 shares respectively, were not used to calculate net loss per
share because of their anti-dilutive effect. There were no reconciling items in
calculating the numerator for net loss per share for any of the periods
presented.

Note 3. Stockholders Equity

In
June 2002, our board of directors adopted a stockholder rights plan and,
pursuant thereto, issued preferred stock purchase rights (Rights) to
the holders of our common stock. The Rights have certain anti-takeover effects.
If triggered, the Rights would cause substantial dilution to a person or group
of persons who acquires more than 15% (19.9% for William W. Featheringill, a
Director who already owns more than 15%) of our common stock on terms not
approved by the board of directors. The rights are not exercisable until the
distribution date, as defined in the Rights Agreement by and between the Company
and American Stock Transfer & Trust Company, as Rights Agent. The Rights
will expire at the close of business on June 24, 2012, unless that final
expiration date is extended or unless the rights are earlier redeemed or
exchanged by the Company.

Each
Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series B Junior Participating Preferred Stock
(Series B), par value $0.001 per share at a purchase price of
$26.00, subject to adjustment. Shares of Series B purchasable upon exercise of
the Rights will not be redeemable. Each share of Series B will be entitled to a
dividend of 1,000 times the dividend declared per share of common stock. In the
event of liquidation, each share of Series B will be entitled to a payment of
1,000 times the payment made per share of common stock. Each share of Series B
will have 1,000 votes, voting together with the common stock. Finally, in the
event of any merger, consolidation, or other transaction in which shares of
common stock are exchanged, each share of Series B will be entitled to receive
1,000 times the amount received per share of common stock.

5

Note 4. Impairment of long-lived assets

The
Company periodically reviews its patents and licenses for impairment in
accordance with Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets
(Statement No. 144) to determine any impairment that needs to be
recognized. During the quarter ended June 30, 2002, the Company abandoned the
development of peramivir, its influenza neuraminidase inhibitor. As a result,
the Company recognized an expense of $374,000 during the quarter related to the
patents for our neuraminidase inhibitors, as they no longer have any readily
determinable value to the Company.

Note 5. Subsequent Events

On
July 10, 2002, the Company streamlined its operations, reducing its workforce
from 75 employees to 45 employees in order to conserve its resources and provide
a longer timeframe in which to advance its other programs. The expenses related
to this reduction in staff will be recognized during the third quarter of 2002.

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on
Form 10-Q contains certain statements of a forward-looking nature relating to
future events or the future financial performance of the Company. Such
statements are only predictions and the actual events or results may differ
materially from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed below as well as those discussed in other filings made by the Company
with the Securities and Exchange Commission, including the Companys Annual
Report on Form 10-K.

Overview

Since
our inception in 1986, we have been engaged in research and development
activities and organizational efforts, including:



identification
and licensing of enzyme targets;



drug
discovery;



structure-based
design of drug candidates;



small-scale
synthesis of compounds;



conducting
preclinical studies and clinical trials;



recruiting
our scientific and management personnel;



establishing
laboratory facilities; and



raising
capital.

Our
revenues have generally been limited to license fees, milestone payments,
interest income, collaboration research and development fees. Prior to January
1, 2000, the Company recognized research and development fees, license fees and
milestone payments as revenue when received. Effective January 1, 2000, the
Company changed its method of accounting for revenue recognition in accordance
with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements (SAB 101). Research and development revenue on
cost-reimbursement agreements is recognized as expenses are incurred, up to
contractual limits. Research and development fees, license fees and milestone
payments are recognized as revenue when the earnings process is complete, the
Company has no further continuing performance obligations and has completed its
performance under the terms of the agreement, in accordance with SAB 101.
License fees and milestone payments received under licensing agreements that are
related to future performance are deferred and taken into income as earned over
the estimated drug development period. The Company has not received any
royalties from the sale of licensed pharmaceutical products. It could be several
years, if ever, before we will recognize significant revenue from royalties
received pursuant to our license agreements, and we do not expect to ever
generate revenue directly from product sales. Future revenues, if any, are
likely to fluctuate substantially from quarter to quarter.

6

We
have incurred operating losses since our inception. Our accumulated deficit at
June 30, 2002 was $85.8 million. We will require substantial expenditures
relating to the development of our current and future drug candidates. During
the three years ended December 31, 2001, we spent 26.9% of our research and
development expenses on contract research and development, including:



payments
to consultants;



funding
of research at academic institutions;



large
scale synthesis of compounds;



preclinical
studies;



engaging
investigators to conduct clinical trials;



hiring
contract research organizations to monitor and gather data on clinical trials; and



using
statisticians to evaluate the results of clinical trials.

The
above expenditures for contract research and development for our current and
future drug candidates will vary from quarter to quarter depending on the status
of our research and development projects. For example, on June 25, 2002, we
announced preliminary Phase III clinical trial data for peramivir, our
investigational oral influenza neuraminidase inhibitor. The trial indicated no
statistically significant difference in the primary efficacy endpoint between
groups treated with peramivir and groups treated with placebo. Based on these
data, we discontinued the development of peramivir. During the first six months
of 2002, our cash expenses related to this trial were approximately $4 million.
After terminating the development of peramivir, the Company streamlined its
operations, reducing its workforce from 75 employees to 45 employees in order to
conserve its resources and provide a longer timeframe in which to advance its
other programs.

Changes
in our existing and future research and development and collaborative
relationships will also impact the status of our research and development
projects. Although we may, in some cases, be able to control the timing of
development expenses, in part by accelerating or decelerating certain of these
costs, many of these costs will be incurred irrespective of whether or not we
are able to discover drug candidates or obtain collaborative partners for
commercialization. As a result, we believe that quarter-to-quarter comparisons
of our financial results are not necessarily meaningful and should not be relied
upon as an indication of future performance. If we fail to meet the research,
clinical and financial expectations of securities analysts and investors, it
could have a material adverse effect on the price of our common stock.

Results of Operations
(three months ended June 30, 2002 compared to the three months ended June 30, 2001)

Revenues
decreased 89.8% to $461,000 in the three months ended June 30, 2002 from
$4,537,000 in the three months ended June 30, 2001. The decrease was primarily
due to a change in accounting estimate in the quarter ended June 30, 2001
following termination by Ortho-McNeil and RWJPRI of the worldwide license
agreement with BioCryst for peramivir, the Companys neuraminidase
inhibitor. As a result of this change, we had no collaborative revenue during
the second quarter of 2002 as compared to $3,634,000 in the second quarter of
2001. In addition, interest and other income decreased 48.9% to $461,000 in the
second quarter of 2002 from $903,000 in the second quarter of 2001, due to a
reduction in cash from funding operations and expansion of our facilities, plus
the effect of lower interest rates on some of our investments.

7

Research
and development expenses increased 61.3% to $4,377,000 in the three months ended
June 30, 2002 from $2,714,000 in the three months ended June 30, 2001. The
increase is primarily attributable to an increase in clinical trial expenses
related to the Phase III development of peramivir. General and administrative
expenses for the three months ended June 30, 2002 increased 32.6% to $871,000 as
compared to the same period in 2001, primarily due to an increase in expenses
related to the adoption of a stockholder rights plan and other professional
fees. Royalty expense decreased 100.00% to $0 in the three months ended June 30,
2002 from $208,000 for the three months ended June 30, 2001, as a result of the
termination agreement with Ortho-McNeil and RWJPRI. During the quarter ended
June 30, 2002, the Company recorded a non-cash impairment loss of $374,000
related to the influenza patents, as this program was terminated effective June
25, 2002.

Results of Operations
(six months ended June 30, 2002 compared to the six months ended June 30, 2001)

Revenues
decreased 84.4% to $1,000,000 in the six months ended June 30, 2002 from
$6,424,000 in the six months ended June 30, 2001. The decrease was primarily due
to a change in accounting estimate in the quarter ended June 30, 2001 following
termination by Ortho-McNeil and RWJPRI of the worldwide license agreement with
BioCryst for peramivir, the Companys neuraminidase inhibitor. As a result
of this change, we had no collaborative revenue during the first six months of
2002 as compared to $4,338,000 in the first six months of 2001. In addition,
interest and other income decreased 52.1% to $1,000,000 in the six months ended
June 30, 2002 from $2,086,000 in the first six months of 2001, due to a
reduction in cash from funding operations and expansion of our facilities, plus
the effect of lower interest rates on some of our investments.

Research
and development expenses increased 86.2% to $9,764,000 in the six months ended
June 30, 2002 from $5,244,000 in the six months ended June 30, 2001. The
increase is primarily attributable to an increase in clinical trial expenses
related to the Phase III development of peramivir. General and administrative
expenses for the six months ended June 30, 2002 increased 20.9% to $1,640,000 as
compared to the same period in 2001, primarily due to an increase in expenses
related to the adoption of a stockholder rights plan and other professional
fees. Royalty expense decreased 100.00% to $0 in the six months ended June 30,
2002 from $249,000 for the six months ended June 30, 2001, as a result of the
termination agreement with Ortho-McNeil and RWJPRI. During the second quarter of
2002, the Company recorded a non-cash impairment loss of $374,000 related to the
influenza patents, as this program was terminated effective June 25, 2002.

Liquidity and Capital
Resources

Cash
expenditures have exceeded revenues since the Companys inception. Our
operations have principally been funded through various sources, including the
following:



public
offerings and private placements of equity and debt securities,



equipment
lease financing,



facility
leases,



collaborative
and other research and development agreements (including licenses and options for
licenses),



research
grants and



interest
income.

In
addition, we have attempted to contain costs and reduce cash flow requirements
by renting scientific equipment and facilities, contracting with other parties
to conduct certain research and development and using consultants. We expect to
incur additional expenses, potentially resulting in significant losses, as we
continue to pursue our research and development activities and undertake
additional preclinical studies and clinical trials of compounds, which have been
or may be discovered. We also expect to incur substantial expenses related to
the filing, prosecution, maintenance, defense and enforcement of patent and
other intellectual property claims.

8

On
June 25, 2002, the Company announced we were discontinuing the development of
peramivir, our investigational oral influenza neuraminidase inhibitor designed
to treat and prevent influenza. After terminating the development of peramivir,
the Company streamlined its operations, reducing its workforce from 75 employees
to 45 employees in order to conserve its resources and provide a longer
timeframe in which to advance its other programs.

The
Company invests its excess cash principally in U.S. marketable securities from a
diversified portfolio of institutions with strong credit ratings and in U.S.
government and agency bills and notes, and by policy, limits the amount of
credit exposure at any one institution. These investments are generally not
collateralized and mature within four years. The Company has not realized any
losses from such investments. In addition, at June 30, 2002, approximately $10.6
million was invested in the Merrill Lynch Premier Institutional Fund, which
invests primarily in commercial paper, U.S. government and agency bills and
notes, corporate notes, certificates of deposit and time deposits. The Merrill
Lynch Premier Institutional Fund is not insured. At June 30, 2002, our cash,
cash equivalents and securities held-to-maturity were $41.8 million, a decrease
of $11.2 million from December 31, 2001, principally due to the funding of
current operations, which included the Phase III development of peramivir prior
to the termination of this program in June 2002.

We
have financed some of our equipment purchases with lease lines of credit. We
currently have a $500,000 general line of credit with our bank, secured by a
pledge of $600,000 in marketable securities. There was nothing drawn against
this line as of June 30, 2002. In July 2000, we renegotiated our lease for our
current facilities, which will expire on June 30, 2010. We have an option to
renew the lease for an additional five years at current market rates. The lease,
as amended effective July 1, 2001 for an additional 7,200 square feet, requires
us to pay monthly rent starting at $33,145 per month in July 2001 and escalating
annually to a minimum of $47,437 per month in the final year, plus our pro rata
share of operating expenses and real estate taxes in excess of base year
amounts. As part of the lease, we have pledged a U.S. Treasury security
deposited in escrow for the payment of rent and performance of other obligations
specified in the lease. This pledged amount is currently $455,000, which will be
decreased by $65,000 annually throughout the term of the lease.

During
2000, we renovated our facilities to gain additional laboratory space, update
our existing laboratories, and add a small good manufacturing practices (GMP)
clean room. In addition, we updated our general office facility to provide for
growth and efficiencies. The total cost of these changes, including furniture
and laboratory equipment, was approximately $2.7 million. This phase of
renovation was completed in December 2000. Another phase of renovation was
completed in February 2002 for approximately $2.6 million to add two chemistry
laboratories and purchase additional equipment. Currently, there are no plans
for additional remodeling.

As
a result of the reduction in our staff during July 2002, we now have
approximately 14,000 square feet of excess space we are currently attempting to
sublease.

At
December 31, 2001, we had long-term operating lease obligations, which provide
for aggregate minimum payments of $567,123 in 2002, $580,803 in 2003 and
$594,897 in 2004. These obligations include the future rental of our operating
facility.

We
plan to finance our needs principally from the following:



our
existing capital resources and interest earned on that capital;



payments
under collaborative and licensing agreements with corporate partners; and



through
lease or loan financing and future public or private financing.

We believe
that our available funds will be sufficient to fund our operations at least
through 2004. However, this is a forward-looking statement, and there may be
changes that would consume available resources significantly before such time.
Our long-term capital requirements and the adequacy of our available funds will
depend upon many factors, including:

9



the
progress of our research, drug discovery and development programs;



changes
in existing collaborative relationships;



our
ability to establish additional collaborative relationships;



the
magnitude of our research and development programs;



the
scope and results of preclinical studies and clinical trials to identify drug candidates;

Additional
funding, whether through additional sales of securities or collaborative or
other arrangements with corporate partners or from other sources, may not be
available when needed or on terms acceptable to us. The issuance of preferred or
common stock or convertible securities, with terms and prices significantly more
favorable than those of the currently outstanding common stock, could have the
effect of diluting or adversely affecting the holdings or rights of our existing
stockholders. In addition, collaborative arrangements may require us to transfer
certain material rights to such corporate partners. Insufficient funds may
require us to delay, scale-back or eliminate certain of our research and
development programs.

Critical Accounting Policies

We
have established various accounting policies that govern the application of
accounting principles generally accepted in the United States in the preparation
of our financial statements. Our significant accounting policies are described
in the footnotes to the financial statements of the Companys most recent
Annual Report on Form 10-K. Certain accounting policies involve significant
judgments and assumptions by management that have a material impact on the
carrying value of certain assets and liabilities; management considers such
accounting policies to be critical accounting policies. The judgments and
assumptions used by management are based on historical experience and other
factors, which are believed to be reasonable under the circumstances. Because of
the nature of the judgments and assumptions made by management, actual results
could differ from these judgments and estimates, which could have a material
impact on the carrying values of assets and liabilities and the results of
operations.

We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Effective
January 1, 2000, we changed our method of accounting for revenue recognition in
accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements (SAB 101). Research and development revenue
on cost-reimbursement agreements is recognized as expenses are incurred, up to
contractual limits. Research and development fees, license fees and milestone
payments are recognized as revenue when the earnings process is complete, the
Company has no further continuing performance obligations and has completed its
performance under the terms of the agreement, in accordance with SAB 101.
License fees and milestone payments received under licensing agreements that are
related to future performance are deferred and taken into income as earned over
the estimated drug development period. Recognized revenues and profit are
subject to revisions as these contracts or agreements progress to completion.
Revisions to revenue or profit estimates are charged to income in the period in
which the facts that give rise to the revision became known.

10

Valuation of Financial
Instruments

We
carry our held-to-maturity securities at amortized cost, as adjusted for
other-than-temporary declines in market value. In determining if and when a
decline in market value below amortized cost is other-than-temporary, we
evaluate the market conditions and other key measures for our held-to-maturity
investments. Future adverse changes in market conditions could result in losses
or an inability to recover the carrying value of the held-to-maturity
investments that may not be reflected in an investments current carrying
value, thereby possibly requiring an impairment charge in the future.

Deferred
Taxes

We
have not had taxable income since incorporation and, therefore, we have not paid
any income tax. We have deferred tax assets related to net operating loss
carryforwards and research and development carryforwards. We record a valuation
allowance to reduce our deferred tax assets to the amount that is more likely
than not to be realized. While we have considered future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for
the valuation allowance, in the event we were to determine that we would be able
to realize the deferred tax assets in the future in excess of the net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made. Likewise, should we determine that we would
not be able to realize all or part of the net deferred tax asset in the future,
an adjustment to the deferred tax asset would be charged to income in the period
such determination was made.

Patents and Licenses

Patents
and licenses are recorded at cost and amortized on a straight-line basis over
their estimated useful lives or 20 years, whichever is lesser. These costs are
reviewed periodically in accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (Statement No. 144) to determine any impairment that
needs to be recognized.

Certain Risk Factors
That May Affect Future Results, Financial Condition and the Market Price of Securities

We have incurred
substantial losses since our inception in 1986, expect to continue to incur such losses,
may never be profitable and may need additional financing

Since
our inception in 1986, we have not been profitable. We expect to incur
additional losses for the foreseeable future, and our losses could increase as
our research and development efforts progress. As of June 30, 2002, our
accumulated deficit was approximately $85.8 million. To become profitable, we
must successfully develop drug candidates, enter into profitable agreements with
other parties and our drug candidates must receive regulatory approval. These
other parties must then successfully manufacture and market our drug candidates.
It could be several years, if ever, before we receive royalties from any future
license agreements. In addition, we never expect to generate revenue directly
from product sales. If we do not generate revenue, or if our drug development
expenses increase, we may need to raise additional funds through new or existing
collaborations or through private or public equity or debt financing. If
financing is not available on acceptable terms or not available at all, we may
not have enough capital to continue our current business strategy.

Our future revenue
generation is uncertain

Our revenue from
collaborative agreements is dependent upon the status of our preclinical and
clinical programs. If we fail to advance these programs to the point of being
able to enter into successful collaborations, we will not receive any future
milestone or other collaborative payments.

11

If our development
collaborations with other parties fail, the development of our drug candidates will be
delayed or stopped

We
rely completely upon other parties for many important stages of our drug
development programs, including:



discovery
of proteins that cause or enable biological reactions necessary for the progression of
the disease or disorder, called enzyme targets;



execution
of some preclinical studies and late-stage development for our compounds and drug
candidates; and

Our
failure to engage in successful collaborations at any one of these stages would
greatly impact our business. If we do not license enzyme targets from academic
institutions or from other biotechnology companies on acceptable terms, our
product development efforts would suffer. Similarly, if the contract research
organizations that conduct our initial or late-stage clinical trials breached
their obligations to us, this would delay or prevent the development of our drug
candidates.

Even
more critical to our success is our ability to enter into successful
collaborations for the late-stage clinical development, regulatory approval,
manufacturing, marketing, sales and distribution of our drug candidates. Our
strategy is to rely upon other parties for all of these steps so that we can
focus exclusively on the key areas of our expertise. This heavy reliance upon
third parties for these critical functions presents several risks, including:



these
contracts may expire or the other parties to the contract may terminate them;



our
partners may choose to pursue alternative technologies, including those of our
competitors;



we
may have disputes with a partner that could lead to litigation or arbitration;

our
partners may not comply with applicable government regulatory requirements.

Any
problems encountered with our current or future partners could delay or prevent
the development of our compounds, which would severely affect our business,
because if our compounds do not reach the market in a timely manner, or at all,
we may never receive any milestone or royalty payments.

If the clinical
trials of our drug candidates fail, our drug candidates will not be marketed, which would
result in a decrease in, or complete absence of, revenue

To
receive the regulatory approvals necessary for the sale of our drug candidates,
we or our licensees must demonstrate through preclinical studies and clinical
trials that each drug candidate is safe and effective. If we or our licensees
are unable to demonstrate that our drug candidates are safe and effective, our
drug candidates will not receive regulatory approval and will not be marketed,
which would result in a decrease in, or complete absence of, revenue. The
clinical trial process is complex and uncertain. Positive results from
preclinical studies and early clinical trials do not ensure positive results in
clinical trials designed to permit application for regulatory approval, called
pivotal clinical trials. We may suffer significant setbacks in pivotal clinical
trials, even after earlier clinical trials show promising results. Any of our
drug candidates may produce undesirable side effects in humans. These side
effects could cause us or regulatory authorities to interrupt, delay or halt
clinical trials of a drug candidate. These side effects could also result in the
FDA or foreign regulatory authorities refusing to approve the drug candidate for
any targeted indications. We, our licensees, the FDA or foreign regulatory
authorities may suspend or terminate clinical trials at any time if we or they
believe the trial participants face unacceptable health risks. Clinical trials
may fail to demonstrate that our drug candidates are safe or effective.

12

Clinical
trials are lengthy and expensive. We or our licensees incur substantial expense
for, and devote significant time to, preclinical testing and clinical trials,
yet cannot be certain that the tests and trials will ever result in the
commercial sale of a product. For example, clinical trials require adequate
supplies of drug and sufficient patient enrollment. Delays in patient enrollment
can result in increased costs and longer development times. Even if we or our
licensees successfully complete clinical trials for our product candidates, our
licensees might not file the required regulatory submissions in a timely manner
and may not receive regulatory approval for the drug candidate.

If we or our
licensees do not obtain and maintain governmental approvals for our products under
development, we or our partners will not be able to sell these potential products, which
would significantly harm our business because we will receive no revenue

We
or our licensees must obtain regulatory approval before marketing or selling our
future drug products. If we or our licensees are unable to receive regulatory
approval and do not market or sell our future drug products, we will never
receive any revenue from such product sales. In the United States, we or our
partners must obtain FDA approval for each drug that we intend to commercialize.
The FDA approval process is typically lengthy and expensive, and approval is
never certain. Products distributed abroad are also subject to foreign
government regulation. The FDA or foreign regulatory agencies have not approved
any of our drug candidates. If we or our licensees fail to obtain regulatory
approval we will be unable to market and sell our future drug products. We have
several drug products in various stages of preclinical and clinical development;
however, we are unable to determine when, if ever, any of these products will be
commercially available. Because of the risks and uncertainties in
biopharmaceutical development, our drug candidates could take a significantly
longer time to gain regulatory approval than we expect or may never gain
approval. If the FDA delays regulatory approval of our drug candidates, our
managements credibility, our companys value and our operating
results may suffer. Even if the FDA or foreign regulatory agencies approve a
drug candidate, the approval may limit the indicated uses for a drug candidate
and/or may require post-marketing studies.

The
FDA regulates, among other things, the record keeping and storage of data
pertaining to potential pharmaceutical products. We currently store most of our
preclinical research data at our facility. While we do store duplicate copies of
most of our clinical data offsite, we could lose important preclinical data if
our facility incurs damage. If we get approval to market our potential products,
whether in the United States or internationally, we will continue to be subject
to extensive regulatory requirements. These requirements are wide ranging and
govern, among other things:



adverse
drug experience reporting regulations;



product
promotion;



product
manufacturing, including good manufacturing practice requirements; and



product
changes or modifications.

Our
failure to comply with existing or future regulatory requirements, or our loss
of, or changes to, previously obtained approvals, could have a material adverse
effect on our business because we will not receive royalty revenues if our
licensees do not receive approval of our products for marketing.

In
June 1995, we notified the FDA that we submitted incorrect data for our Phase II
studies of BCX-34 applied to the skin for cutaneous T-cell lymphoma and
psoriasis. The FDA inspected us in November 1995 and issued us a List of
Inspectional Observations, Form FDA 483, which cited our failure to follow good
clinical practices. The FDA also inspected us in June 1996. The focus was on the
two 1995 Phase II dose-ranging studies of topical BCX-34 for the treatment of
cutaneous T-cell lymphoma and psoriasis. As a result of the investigation, the
FDA issued us a Form FDA 483, which cited our failure to follow good clinical
practices. BioCryst is no longer developing BCX-34; however, as a consequence of
these two investigations, our ongoing and future clinical studies may receive
increased scrutiny, which may delay the regulatory review process.

13

If our drug
candidates do not achieve broad market acceptance, our business may never become
profitable

Our
drug candidates may not gain the market acceptance required for us to be
profitable even if they receive approval for sale by the FDA or foreign
regulatory agencies. The degree of market acceptance of any drug candidates that
we or our partners develop will depend on a number of factors, including:



cost-effectiveness
of our drug candidates;



their
safety and effectiveness relative to alternative treatments;



reimbursement
policies of government and third-party payers; and



marketing
and distribution support for our drug candidates.

Physicians,
patients, payers or the medical community in general may not accept or use our
drug candidates even after the FDA or foreign regulatory agencies approve the
drug candidates. If our drug candidates do not achieve significant market
acceptance, we will not have enough revenues to become profitable.

If competitive
products from other companies are better than our product candidates, our future revenues
might fail to meet expectations

The
biotechnology and pharmaceutical industries are highly competitive and are
subject to rapid and substantial technological change. Other products and
therapies that either currently exist on the market or are under development
could compete directly with some of the compounds that we are seeking to develop
and market. These other products may render some or all of our compounds under
development noncompetitive or obsolete. Products marketed by our competitors may
prove to be more effective than our own, and our products, if any, may not offer
an economically feasible or preferable alternative to existing therapies.

If we fail to
adequately protect or enforce our intellectual property rights or secure rights to
patents of others, the value of those rights would diminish

Our
success will depend in part on our ability and the abilities of our licensors to
obtain patent protection for our products, methods, processes and other
technologies to preserve our trade secrets, and to operate without infringing
the proprietary rights of third parties. If we or our partners are unable to
adequately protect or enforce our intellectual property rights for our products,
methods, processes and other technologies, the value of the drug candidates that
we license to derive revenue would diminish. Additionally, if our products,
methods, processes and other technologies infringe the proprietary rights of
other parties, we could incur substantial costs. The U.S. Patent and Trademark
Office has issued to us a number of U.S. patents for our various inventions and
we have in-licensed several patents from various institutions. We have filed
additional patent applications and provisional patent applications with the U.S.
Patent and Trademark Office. We have filed a number of corresponding foreign
patent applications and intend to file additional foreign and U.S. patent
applications, as appropriate. We cannot assure you as to:



the
degree and range of protection any patents will afford against competitors with similar
products;



if
and when patents will issue; or



whether
or not others will obtain patents claiming aspects similar to those covered by our patent
applications.

If
the U.S. Patent and Trademark Office upholds patents issued to others or if the
U.S. Patent and Trademark Office grants patent applications filed by others, we
may have to:

We
may initiate, or others may bring against us, litigation or administrative
proceedings related to intellectual property rights, including proceedings
before the U.S. Patent and Trademark Office. Any judgment adverse to us in any
litigation or other proceeding arising in connection with a patent or patent
application could materially and adversely affect our business, financial
condition and results of operations. In addition, the costs of any such
proceeding may be substantial whether or not we are successful.

Our
success is also dependent upon the skills, knowledge and experience, none of
which is patentable, of our scientific and technical personnel. To help protect
our rights, we require all employees, consultants, advisors and collaborators to
enter into confidentiality agreements that prohibit the disclosure of
confidential information to anyone outside of our company and require disclosure
and assignment to us of their ideas, developments, discoveries and inventions.
These agreements may not provide adequate protection for our trade secrets,
know-how or other proprietary information in the event of any unauthorized use
or disclosure or the lawful development by others of such information, and if
any of our proprietary information is disclosed, our business will suffer
because our revenues depend upon our ability to license our technology and any
such events would significantly impair the value of such a license.

If we fail to retain
our existing key personnel or fail to attract and retain additional key personnel, the
development of our drug candidates and the expansion of our business will be delayed or
stopped

We
are highly dependent upon our senior management and scientific team, the loss of
whose services might impede the achievement of our development and commercial
objectives. Competition for key personnel with the experience that we require is
intense and is expected to continue to increase. Our inability to attract and
retain the required number of skilled and experienced management, operational
and scientific personnel, will harm our business because we rely upon these
personnel for many critical functions of our business. In addition, we rely on
members of our scientific advisory board and consultants to assist us in
formulating our research and development strategy. All of the members of the
scientific advisory board and all of our consultants are otherwise employed and
each such member or consultant may have commitments to other entities that may
limit their availability to us.

If users of our drug
products are not reimbursed for use, future sales of our drug products will decline

The
lack of reimbursement for the use of our product candidates by hospitals,
clinics, patients or doctors will harm our business. Medicare, Medicaid, health
maintenance organizations and other third-party payers may not authorize or
otherwise budget for the reimbursement of our products. Governmental and
third-party payers are increasingly challenging the prices charged for medical
products and services. We cannot be sure that third-party payers would view our
product candidates as cost-effective, that reimbursement will be available to
consumers or that reimbursement will be sufficient to allow our product
candidates to be marketed on a competitive basis. Changes in reimbursement
policies, or attempts to contain costs in the health care industry, limit or
restrict reimbursement for our product candidates, would materially and
adversely affect our business, because future product sales would decline and we
would receive less royalty revenue.

If we face clinical
trial liability claims related to the use or misuse of our compounds in clinical trials,
our managements time will be diverted and we will incur litigation costs

We
face an inherent business risk of liability claims in the event that the use or
misuse of our compounds results in personal injury or death. We have not
experienced any clinical trial liability claims to date, but we may experience
these claims in the future. After commercial introduction of our products we may
experience losses due to product liability claims. We currently maintain
clinical trial liability insurance coverage in the amount of $5.0 million per
occurrence and $5.0 million in the aggregate, with an additional $2.0 million
potentially available under our umbrella policy. The insurance policy may not be
sufficient to cover claims that may be made against us. Clinical trial liability
insurance may not be available in the future on acceptable terms, if at all. Any
claims against us, regardless of their merit, could materially and adversely
affect our financial condition, because litigation related to these claims would
strain our financial resources in addition to consuming the time and attention
of our management.

15

If our computer
systems fail, our business will suffer

Our
drug development activities depend on the security, integrity and performance of
the computer systems supporting them, and the failure of our computer systems
could delay our drug development efforts. We currently store most of our
preclinical and clinical data at our facility. Duplicate copies of all critical
data are stored off-site in a bank vault. Any significant degradation or failure
of our computer systems could cause us to inaccurately calculate or lose our
data. Loss of data could result in significant delays in our drug development
process and any system failure could harm our business and operations.

If, because of our
use of hazardous materials, we violate any environmental controls or regulations that
apply to such materials, we may incur substantial costs and expenses in our remediation
efforts

Our
research and development involves the controlled use of hazardous materials,
chemicals and various radioactive compounds. We are subject to federal, state
and local laws and regulations governing the use, storage, handling and disposal
of these materials and some waste products. Accidental contamination or injury
from these materials could occur. In the event of an accident, we could be
liable for any damages that result and any liabilities could exceed our
resources. Compliance with environmental laws and regulations could require us
to incur substantial unexpected costs, which would materially and adversely
affect our results of operations.

Because stock
ownership is concentrated, you and other investors will have minimal influence on
stockholder decisions

Our
directors, executive officers and some principal stockholders and their
affiliates, including Johnson & Johnson Development Corporation,
beneficially own approximately 44% (directors and officers own 28%) of our
outstanding common stock and common stock equivalents. As a result, these
holders, if acting together, are able to significantly influence matters
requiring stockholder approval, including the election of directors. This
concentration of ownership may delay, defer or prevent a change in our control.

We have anti-takeover
provisions in our corporate charter documents that may result in outcomes with which you
do not agree

Our
board of directors has the authority to issue up to 3,178,500 shares of
undesignated preferred stock and to determine the rights, preferences,
privileges and restrictions of those shares without further vote or action by
our stockholders. The rights of the holders of any preferred stock that may be
issued in the future may adversely affect the rights of the holders of common
stock. The issuance of preferred stock could make it more difficult for third
parties to acquire a majority of our outstanding voting stock.

In
addition, our certificate of incorporation provides for staggered terms for the
members of the board of directors and supermajority approval of the removal of
any member of the board of directors and prevents our stockholders from acting
by written consent. Our certificate also requires supermajority approval of any
amendment of these provisions. These provisions and other provisions of our
by-laws and of Delaware law applicable to us could delay or make more difficult
a merger, tender offer or proxy contest involving us.

In
June 2002, our board of directors adopted a stockholder rights plan and,
pursuant thereto, issued preferred stock purchase rights (Rights) to
the holders of our common stock. The Rights have certain anti-takeover effects.
If triggered, the Rights would cause substantial dilution to a person or group
of persons who acquires more than 15% (19.9% for William W. Featheringill, a
Director who already owns more than 15%) of our common stock on terms not
approved by the board of directors.

16

Our stock price is
likely to be highly volatile and the value of your investment could decline significantly

The
market prices for securities of biotechnology companies in general have been
highly volatile and may continue to be highly volatile in the future. Moreover,
our stock price has fluctuated frequently, and these fluctuations are often not
related to our financial results. For the twelve months ended June 30, 2002, the
52-week range of the market price of our stock has been from $0.60 to $6.59 per
share. The following factors, in addition to other risk factors described in
this section, may have a significant impact on the market price of our common
stock:



announcements
of technological innovations or new products by us or our competitors;



developments
or disputes concerning patents or proprietary rights;



status
of new or existing licensing or collaborative agreements;



we
or our licensees achieving or failing to achieve development milestones;



publicity
regarding actual or potential medical results relating to products under development by
us or our competitors;



regulatory
developments in both the United States and foreign countries;



public
concern as to the safety of pharmaceutical products;



actual
or anticipated fluctuations in our operating results;



changes
in financial estimates or recommendations by securities analysts;



economic
and other external factors or other disasters or crises; and



period-to-period
fluctuations in our financial results.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The
primary objective of our investment activities is to preserve principal while
maximizing the income we receive from our investments without significantly
increasing our risk. We invest excess cash principally in U.S. marketable
securities from a diversified portfolio of institutions with strong credit
ratings and in U.S. government and agency bills and notes, and by policy, limit
the amount of credit exposure at any one institution. Some of the securities we
invest in may have market risk. This means that a change in prevailing interest
rates may cause the principal amount of the investment to fluctuate. To minimize
this risk, we schedule our investments to have maturities that coincide with our
cash flow needs, thus avoiding the need to redeem an investment prior to its
maturity date. Accordingly, we believe we have no material exposure to interest
rate risk arising from our investments. Therefore, no quantitative tabular
disclosure is provided.

PART II.
OTHER INFORMATION

Item 1. Legal Proceedings:

None

Item 2. Changes in Securities and Use of Proceeds:

None

Item 3. Defaults Upon Senior Securities:

None

17

Item 4. Submission of Matters to a Vote of Security Holders:

(a)

The
Companys annual meeting of stockholders was held on May 15, 2002.

Item 5. Other Information:

Item 6. Exhibits and Reports on Form 8-K:

Composite
Certificate of Incorporation of Registrant. Incorporated by reference to Exhibit 3.1 to
the Companys Form 10-Q for the second quarter ending June 30, 1995 dated August 11, 1995.

3.2

Bylaws
of Registrant. Incorporated by reference to Exhibit 3.1 to the Companys Form 10-Q for
the second quarter ending June 30, 1995 dated August 11, 1995.

4.1

See
Exhibits 3.1 and 3.2 for provisions of the Composite Certificate of Incorporation and
Bylaws of the Registrant defining rights of holders of Common Stock of the Registrant.

4.2

Rights
Agreement, dated as of June 17, 2002, by and between the Company and American Stock
Transfer & Trust Company, as Rights Agent, which includes the Certificate of
Designation for the Series B Junior Participating Preferred Stock as Exhibit A and the
form of Rights Certificate as Exhibit B. Incorporated by reference to Exhibit 4.1 to the
Companys Form 8-A dated June 17, 2002.

10.1

1991
Stock Option Plan, as amended and restated as of March 6, 2000. Incorporated by reference
to Exhibit 99.1 to the Companys Form S-8 Registration Statement dated June 16, 2000
(Registration No. 333-39484).

10.2

Employment
Agreement dated December 27, 1999 between the Registrant and Charles E. Bugg, Ph.D.
Incorporated by reference to Exhibit 10.10 to the Companys Form 10-K for the year
ending December 31, 1999 dated March 24, 2000.

18

10.3#

License
Agreement dated April 15, 1993 between Ciba-Geigy Corporation (now merged into Novartis)
and the Registrant. Incorporated by reference to Exhibit 10.40 to the Companys Form S-1
Registration Statement (Registration No. 33-73868).

License
Agreement dated as of September 14, 1998 between Registrant and The R.W. Johnson
Pharmaceutical Research Institute and Ortho-McNeil Pharmaceutical, Inc. Incorporated by
reference to Exhibit 10.23 to the Companys Form 10-Q for the third quarter ending
September 30, 1998 dated November 10, 1998.

10.6#

Stock
Purchase Agreement dated as of September 14, 1998 between Registrant and Johnson & Johnson
Development Corporation. Incorporated by reference to Exhibit 10.24 to the Companys Form
10-Q for the third quarter ending September 30, 1998 dated November 10, 1998.

10.7#

Stockholders
Agreement dated as of September 14, 1998 between Registrant and Johnson & Johnson
Development Corporation. Incorporated by reference to Exhibit 10.25 to the Companys Form
10-Q for the third quarter ending September 30, 1998 dated November 10, 1998.

10.8

Warehouse
Lease dated July 12, 2000 between RBP, LLC an Alabama Limited Liability Company and the
Registrant for office/warehouse space. Incorporated by reference to Exhibit 10.8 to the
Companys Form 10-Q for the second quarter ending June 30, 2000 dated August 8, 2000.

10.9*

Termination
Agreement dated as of September 21, 2001 between Registrant and The R.W. Johnson
Pharmaceutical Research Institute and Ortho-McNeil Pharmaceutical, Inc.

10.10

Change
of Control Agreement dated May 25, 2001 between the Registrant and W. Randall Pittman.
Incorporated by reference to Exhibit 10.10 to the Companys Form 10-K for the year
ending December 31, 2001 dated March 22, 2002.

99.1

Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

99.2

Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

#

Confidential
treatment granted.

*

Previously
filed as Exhibit 10.9 to the Companys Form 10-Q/A for the third quarter ending
September 30, 2001, dated January 15, 2002, with confidential treatment granted.

b.

Reports
on Form 8-K: The following report on Form 8-K was filed by BioCryst on June 17, 2002.

Rights
Agreement, dated as of June 17, 2002, by and between the Company and American Stock
Transfer & Trust Company, as Rights Agent, which includes the Certificate of
Designation for the Series B Junior Participating Preferred Stock as Exhibit A and the
form of Rights Certificate as Exhibit B.

19

SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.